What Is Hindu Rate of Growth?
The "Hindu rate of growth" is a term used in macroeconomics to describe the slow pace of economic growth experienced by the Indian economy from the 1950s to the 1980s. During this period, India's annual Gross Domestic Product (GDP) growth averaged approximately 3.5% to 4%.30, 31 The term implicitly suggests that cultural factors, specifically aspects of Hindu philosophy, contributed to this modest growth rate, though this interpretation is widely debated and criticized.29 It highlights a period before significant economic reforms transformed the nation's economic trajectory.
History and Origin
The term "Hindu rate of growth" was coined by the Indian economist Raj Krishna in 1978.27, 28 Krishna, a lecturer at the Delhi School of Economics, used the phrase to characterize the consistently low and stagnant growth rates observed in India despite changes in government and various crises.26 The period from the 1950s to the 1980s was marked by a centrally-planned, dirigiste economic model with substantial government involvement, import substitution policies, and state control over key industries.25 This approach, while aiming for self-reliance, resulted in a slow expansion of the overall Gross Domestic Product and low per capita income growth, prompting the coining of the term to draw attention to this economic stagnation.23, 24
Key Takeaways
- The "Hindu rate of growth" refers to India's average annual GDP growth of approximately 3.5% to 4% from the 1950s to the 1980s.21, 22
- It was coined by economist Raj Krishna in 1978 to highlight the consistently slow economic expansion during this period.19, 20
- The period was characterized by socialist economic policies, extensive state control, and import substitution strategies.
- The term implies a cultural link to economic performance, an interpretation that has faced significant criticism.18
- India's economic trajectory dramatically changed after the liberalization reforms initiated in 1991.17
Interpreting the Hindu Rate of Growth
The Hindu rate of growth is interpreted as an indicator of economic underperformance, particularly when compared to the higher growth rates achieved by other developing economies in Asia during the same period. It serves as a historical benchmark to contrast India's pre-reform economic policies with its post-reform accelerated economic growth. Economists often cite this period to illustrate the limitations of a highly regulated, centrally-planned economy that restricted private investment and foreign trade.
Hypothetical Example
Imagine a hypothetical developing nation, "Agraria," which adopts a heavily state-controlled economic model similar to India's pre-1991 era. Agraria implements policies focusing on self-reliance, with strict controls on imports and limited foreign direct investment. Its public sector dominates key industries like manufacturing and infrastructure. Over several decades, despite various five-year plans, Agraria's annual GDP growth consistently hovers around 3.8%. Meanwhile, neighboring nations that embraced more outward-looking, market economy principles achieve growth rates of 6-8% per year. The sustained, modest growth in Agraria, relative to its potential and its peers, could metaphorically be referred to as its "Agrarian rate of growth," analogous to the "Hindu rate of growth" in India's history. This scenario highlights how restrictive policies can limit overall economic expansion.
Practical Applications
The concept of the "Hindu rate of growth" is primarily used in historical and analytical discussions of India's economic development. It serves as a reference point when analyzing the impact of past economic policies and the profound shift brought about by the 1991 economic reforms. Economists and policymakers frequently compare India's current economic growth with this historical low, especially during periods of global slowdowns or domestic economic challenges, to assess performance or warn against complacency. For instance, former Reserve Bank of India Governor Raghuram Rajan referred to India being "dangerously close" to the Hindu rate of growth in early 2023, citing subdued private sector investment, high interest rates, and slowing global growth.15, 16 This term is also invoked in discussions about the effectiveness of liberalization, privatization, and globalization policies in driving accelerated development in nations like India.14 Since 1991, India's economy has generally grown at a significantly faster pace, often averaging 6-7% annually.13 More recent World Bank data shows that India's average growth over continuous 10-year periods has steadily accelerated since the early 1990s, becoming more stable.11, 12
Limitations and Criticisms
While the "Hindu rate of growth" serves as a historical descriptor, it has faced several criticisms. A primary critique is the implied cultural determinism, suggesting that religious or cultural beliefs inherently limited economic progress. Many economists argue that the low growth was a direct consequence of specific economic policies, such as central planning, extensive government regulations (often referred to as the "License Raj"), and inward-looking trade strategies, rather than cultural factors. Furthermore, some critics argue that the term oversimplifies the complex interplay of economic, political, and social factors that influence a country's growth rate. The focus solely on Gross Domestic Product growth as the sole metric for progress is also debated, as it may overlook improvements in self-reliance or social indicators during that period. The term is seen by some as a "polemical device" that aims to shift blame from policy failures to cultural shortcomings.9, 10
Hindu Rate of Growth vs. Economic Growth
The "Hindu rate of growth" refers to a specific historical period and a particular range of low economic growth in India (roughly 3.5%-4% from 1950s-1980s).7, 8 In contrast, "economic growth" is a broad, universal term that denotes the increase in the production of goods and services in an economy over time, typically measured by the annual percentage change in real Gross Domestic Product. While the Hindu rate of growth describes a type or pace of economic growth specific to a certain context and time, economic growth is the general concept that applies to any economy at any time, encompassing varying rates, whether slow, moderate, or rapid. The confusion often arises when commentators use the historical "Hindu rate of growth" to warn about a potential return to slower economic expansion, even though the underlying structural factors of the economy may have changed significantly due to economic reforms.
FAQs
What was the approximate growth rate during the "Hindu rate of growth" period?
During the period often referred to as the "Hindu rate of growth," India's annual Gross Domestic Product growth averaged around 3.5% to 4%.5, 6
Who coined the term "Hindu rate of growth"?
The term was coined by Indian economist Raj Krishna in 1978.3, 4
Why did India experience the "Hindu rate of growth"?
The slow growth during this period is largely attributed to the economic policies then in place, which included central planning, extensive government control, import substitution, and limited liberalization. These policies constrained private sector growth and integration with the global economy.
Is the "Hindu rate of growth" still relevant today?
While India's economy has grown much faster since the 1991 economic reforms, the term is still used in economic discourse as a historical reference point to highlight periods of slow growth or to emphasize the importance of policy choices that promote faster development.
Does the term imply that Hinduism caused the slow growth?
The term's coiner, Raj Krishna, intended it to be a descriptive, polemical device rather than a critical assessment of Hinduism.2 However, the name itself has led to interpretations, sometimes criticized, that suggest a cultural link to economic stagnation. Most economists attribute the slow growth to prevailing economic policies rather than religious beliefs.1